So I learned a thing this week. Apparently, Vietnam is developing a national innovation center (NIC) aimed at promoting innovative startups in the country. What that means is not entirely clear as of yet. The NIC was only approved at the end of 2019 and seems heavily reliant on a physical location that remains unidentified, though somewhere in the Hoa Lac Hi-Tech Zone in the Hanoi area. Whether the NIC will be limited to a single center is also unclear as it is allowed land rent privileges in all special economic zones.

The purpose of the NIC is to provide innovative startups in Vietnam with a launching pad and with incentives and support to help build the innovation ecosystem and encourage the development of creative and technology-related startups. You can visit the NIC’s English website, here, but don’t expect to learn much. The site is glitchy and rather vague about a lot of issues and a quick glance at the Vietnamese site shows that there’s not much more information available there either.

That said, the NIC has a lofty mission.

To build the nations complete innovation ecosystem, provide facilities to support innovative enterprises with a focus on promoting technological transfer, research & development, and commercialization in a favorable regulatory experimenting environment to ensure competitiveness on regional and international levels.

The NIC will not only provide space for startups once the NIC’s construction is completed, but they will provide support for seeking investments, the administrative tasks involved in making those investments happen, tendering, and a host of other things.

The government is going all-in with the NIC and providing a great number of benefits to the center itself including exemptions from land rents and infrastructure fees throughout its 50-year term, and a 10% corporate income tax rate with exemptions for the first several years. The NIC is, according to certain language, eligible for all of the highest incentives and support available. However, the NIC is not authorized to take out loans or to receive donations that are not non-refundable in its own name. This limits, somewhat, its potential growth as it will be restricted by what donations it can round up and the government’s spending allocations.

Participants that are encouraged to locate in the NIC include innovative startup enterprises, telecom enterprises; and IT, automation, and other relevant enterprises. All of these will be allowed to use the NIC to establish offices and research and development departments. Unfortunately, participation at this point and access to the many benefits allocated to startups as part of the NIC seems to be dependent on actually locating at the NIC physical plant. Whether the NIC will allow for virtual offices or provide a co-working environment where participants will be able to maintain only a minimum presence to enjoy the incentives is not stated.

But perhaps that is why there are so many actual incentives, to make up for having to work in the Hoa-Lac Hi-Tech Zone. The list of incentives was set out in the middle of last year in Decree 94/2020/ND-CP and further amended a few months ago. The list is impressive.

NIC Innovative Startups Incentives

Foreigners working at the NIC will be eligible for multiple-entry visas with a duration commensurate to their actual time at the NIC. Immediate family members of such foreigners will also be eligible for these visas.

Participants may receive sponsorship, support, loans, and loan guarantees from the National Technology Innovation Fund, from the National S&T Development Fund, the Fund for Development of Small and Medium Size Enterprises, and from S&T Funds of central provinces and cities.

Participants are exempted from certain pre-qualification requirements under the law on tendering when they submit tender bids for contracts. Stated exemptions include those regarding the participants’ capacity and experience, requirements on turnover, financial resources, and similar contracts. Small and micro-startups at the NIC will be treated the same as contractors providing goods deemed to have 25% of their costs being domestic production costs. I’m not familiar with the law on tendering, but I take it this is a specific category of a contractor with specific criteria assigned.

The NIC will also provide support for participants located at the center. They will assist in the conduct of administrative procedures that may arise throughout the lifecycle of the startup, from initial research and development to investment to commercialization. They will provide the entry and exit permits as necessary to staff. And they will provide their network (probably still small at this point) of relevant industry insiders. Participants will also have access to the NIC’s labs and technology resources.

Two benefits that are rather big come in the process of various registrations. As the NIC will work closely with the economic zone’s business registration office, they are guaranteeing a one-day turnaround for business registration upon receipt of a properly completed application dossier. On paper that reduces the time to obtain an Enterprise Registration Certificate by two weeks while, if it actually happens that quickly, could save upwards of a month or more in waiting on the authorities. The second big benefit is in the registration of industrial property rights. Participants at the NIC will, upon request, be directed to the front of the line when it comes to registration of IPRs with the authorities and this could not only save a considerable amount of time but may mean the ownership of IP when competing claimants file.

Finally, participants will be eligible for the highest incentives allowed by the law on tax, which could mean a considerable reduction in corporate income tax. It isn’t clear whether this applies to both the enterprises at the NIC and the individuals working for those enterprises or just the enterprises. Either way, the savings could be significant.

When I was in Laos my employer wanted to create a special economic zone in which they would control all of the administrative processes involved in the life cycle of any enterprise that decided to incorporate in that zone. That would mean approvals of business registration, immigration, import/export, tax, everything, and in so doing remove much of the red tape friction that occurs in developing countries. While the NIC does not necessarily achieve this same level of sovereignty, it seems that it might go a long way in reducing the various struggles faced by foreign investors seeking to set up shop here in Vietnam.

The NIC is an interesting idea for innovative startups in Vietnam, and there is potential here, but China long ago put in place similar and more extensive programs to lure in foreign innovators. If Vietnam truly wants to compete in the market for foreign talent and for innovative startups, then they need to offer these same benefits on a wider level, not just on a single campus outside Hanoi. It is a start, however, and the NIC symbolizes the government’s desire to promote innovative startups in Vietnam. Whether it actually happens and whether it works remains to be seen.